Mix It Up

In the '90s, investors sought companies that reinvested
earnings for higher profits-and those looking for reliable
income streams focused on bonds. But a combination of a less
exuberant market and a new tax law lowering the tax rate on
dividends is changing that picture, says Ross Levin, president of
financial planning firm Accredited Investors Inc. in Edina,
Minnesota, who advises investors to consider adding dividend stocks
to taxable investment portfolios.

"Dividends are taxed at most at 15 percent and, depending
on your taxable income, as low as 5 percent," says Levin.
"For those in the highest tax brackets or those who require
income from their portfolios, that differential is a huge
benefit." Ideally, such investors should diversify holdings by
buying a mix of stocks or investing through a mutual fund
concentrating on dividend-paying stocks.

"If you're going to buy stocks, you want at least five
to seven, diversified among industries, and check that they qualify
for the tax exclusion," says Levin, who also cautions
investors not to focus exclusively on dividend stocks. "You
should have a portfolio of both investments that pay a predictable
stream of income and others that are growth-oriented."

Deep Pockets

Got a college-bound kid? Watch out for skyrocketing tuition
costs. According to the "Trends in College Pricing 2003"
report from the College Board, a national nonprofit association,
the average cost of tuition and fees at the nation's four-year
colleges and universities has jumped 42 percent for private
institutions and 47 percent for public institutions over the past
decade. The price tag for a year's tuition at a private
university is now a whopping $19,710; a year of public school will
run $4,694, according to the report.

"That's only tuition and fees-it doesn't
include room and board," adds Jim Boyle, president of
Arlington, Virginia-based College Parents of America, a nonprofit that
provides resources and information for parents. Over the next
decade, Boyle puts the true cost of a year of private college at
between $40,000 and $60,000. He says the only way most parents can
hope to fund a child's education without incurring considerable
debt is to start planning early on. "There are some wonderful
savings plans, such as state-sponsored 529 plans, but you have to
recognize that this is a high-ticket item and plan ahead," he
explains, adding that parents whose children are already
college-age should consider Parent Loans for Undergraduate
Students, low-interest federal loans available through the Federal
Family Education Loan Program.

Put on the Brakes

The small-business write-off for Ford Excursions, GMC Yukons,
Hummers and other vehicles weighing in at 6,000 pounds or more
(known as the "Hummer loophole") has come to a screeching
slowdown. Under the Bush tax cut enacted last May, taxpayers
purchasing a vehicle weighing 6,000-plus pounds for business use
were briefly able to write off $100,000 in the first year, a
measure intended to encourage small businesses to invest in new
equipment. But last October, the Senate Finance Committee slashed
the first-year accelerated deduction from $100,000 back to $25,000
for hefty vehicles.

The good news: The Committee kept the $100,000 write-off for
certain heavy trucks and refrigerated vans-and the $25,000
deduction still far outweighs the $7,660 first-year deduction
allowed for a car. Yet Hummer and SUV buyers may want to rethink
that fat deduction, say tax experts.

"Once you elect a method for deducting the business use of
a vehicle, you can't change it," explains Jim Thigpen,
president of Monarch Financial Services Inc. in Roswell, Georgia.
"The operating expense method allows the big depreciation
write-off in the first year, but a limited one for the rest of the
years you own the vehicle. If you use the mileage rate of 37 cents
per mile, you can take that for as long as you own the
vehicle."

Often, says Thigpen, business owners are lulled by the prospect
of a fat first-year deduction, when writing off mileage annually
will actually net the biggest long-term tax savings. He advises,
"Factor in how long you'll own the vehicle and how much
you'll drive it."

The number of loans by the SBA to
minorities increased38%2003 from the prior year.SOURCE:
SBA